By Fernando Álvarez: Ex IMF Economist
Through Press Release No. 11/480 of December 22, 2011 the Fund reported that the Executive Board of the International Monetary Fund (IMF) completed on December 21, 2011, its review of Mexico’s qualification for the arrangement under the Flexible Credit Line (FCL) and reaffirmed Mexico’s continued qualification to access FCL resources. The Mexican authorities have indicated that they intend to continue treating the arrangement as precautionary.
The two year arrangement for Mexico for SDR 47.292 billion (about US$73 billion), approved in January 10, 2011 (see Press Release No. 11/4), was the first under the reforms to the FCL approved in August 30, 2010 (see Press Release No. 10/321). Following the Executive Board discussion of Mexico, Mr. David Lipton, First Deputy Managing Director and Acting Chairman of the Board, made the following statement: “The Flexible Credit Line (FCL) arrangement for Mexico, approved a year ago in a context of heightened risks to the global economic outlook, has played an important role in supporting the authorities’ overall macroeconomic strategy, providing an insurance against global tail risks and bolstering market confidence. Today, the Executive Board reaffirmed that Mexico continues to meet the qualification criteria for access to FCL resources.
“Mexico’s rapid rebound from the global crisis and the resilience of economic activity in recent months bear witness to Mexico’s sound fundamentals and skillful policy management. The strong policy track record and frameworks, including a balanced-budget rule, a credible inflation targeting regime, and prudent financial oversight, have underpinned sound public and private balance sheets.
“The authorities are committed to rebuilding policy buffers gradually in light of heightened global risks. Fiscal consolidation and supportive monetary policy are poised to be maintained, while the increase in external buffers is being complemented by the FCL arrangement. The floating exchange rate regime will continue to play a key role in buffering external shocks.
“Downside risks to Mexico’s near-term outlook arise from unsettled global growth prospects and the turbulence in international financial markets. However, Mexico retains policy space to contain the potential fallout from external shocks, supported by the FCL arrangement, and the authorities remain committed to the rules-based macroeconomic framework and to adjust policies as needed,” Mr. Lipton said.
